As government debates on gas price hike and a new contract for oil and gas exploration, Vedanta Resource today said domestic rates should be linked to international markets and an independent regulator be set up.

Speaking at an oil and gas seminar organised by Indian Chambers of Commerce, Vedanta chief executive Tom Albanese said “the current policy environment fostered uncertainty and did not encourage intensified exploration and production of domestic resources.”

He, however, backed the oil ministry move to replace the controversial production sharing contracts (PSC) for oil and gas exploration with simpler revenue-sharing regime. The new regime where companies will bid upfront the quantity of oil and gas they will share with the government, will replace PSC regime that allowed investors to recover all their cost before sharing any spoils with the government.

This model was criticised by CAG which said it encouraged companies to keep raising cost so as to postpone higher share of profits with the government.

“I believe the government’s recent initiatives to introduce a revenue sharing model is one such change that will minimise cost recovery issues and delays that have led to uncertainties for producers. Extending this principle to establish an independent regulator for the sector would be another great decisive step,” he said.

Similarly, to convey a strong message to international investors, “it is important to link oil and gas prices to international markets. Timely and right price enable investors to plan their investments and optimise production,” he said.

The government is currently debating a new gas pricing mechanism to replace the Rangarajan formula which would have doubled rates to $8.4 per million British thermal unit.

Life of PSCs is another apt example. “Limited tenures with provisions of multiple renewals do not allow companies and investors to put in place business plans that maximise output over the economic life of the field,” he said.

Vedanta Group firm Cairn India is seeking extension of the contract for Rajasthan oilfields beyond their current term ending in 2019.